Like to invest in companies that lose money? Tomorrow's your lucky day. Over its history, online drug retailer drugstore.com
Wall Street Wisdom:
- General consensus. Remember the old expression, "me, myself, and I?" That's the kind of "consensus" we have on drugstore.com. The stock has just one analyst following it, and that analyst's rating -- "hold" -- isn't terribly helpful to investors.
- Revenues. The "consensus" view calls for 6% sales growth in Q4 2005 vs. Q4 2004 -- $109.7 million in all.
- Earnings. Net losses are expected to increase by a penny year over year, to $0.08.
Margin watch:
drugstore.com's margins aren't pretty, although they certainly are instructive. Notice how both gross and operating margins look pretty much stable over the past 18 months? See how the same isn't true about the net margins?
The reason for that is, with a trailing-12-month (TTM) view, a one-time charge (which affects net, but not gross or operating, margins) taken in one quarter gets spread out over time. It affects the results not just for the quarter in which it's taken, but for the three quarters subsequent, as well. In drugstore.com's case, you're looking at $27 million worth of one-time charges, taken in the September 2004 quarter, affecting the TTM results all the way through the June 2005 quarter.
Margins % |
6/04 |
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
---|---|---|---|---|---|---|
Gross |
21.0 |
12.1 |
20.3 |
20.1 |
20.2 |
20.0 |
Op. |
(5.3) |
(5.3) |
(5.5) |
(5.3) |
(5.0) |
(5.2) |
Net |
(5.9) |
(13.7) |
(13.3) |
(12.8) |
(12.4) |
(5.5) |
Foolish lookout:
You can also see how, as soon as the three post-charge quarters elapse, drugstore.com's TTM net margin bounces right back to where it was before the charge: negative 5-point-something percent. Considering the consistency of the company's operations over the past 18 months, barring any surprises, I'd expect tomorrow's margins to look a lot like they did back in June 2004.
Kudos alert:
Discouraging as drugstore.com's numbers appear, the company does deserve praise in one respect. Nearly a year ago, I took drugstore.com to task for being one of the many companies that don't include cash flow statements in their earnings press releases. Ever since then, drugstore.com has provided the crucial data needed to calculate free cash flow, right there alongside the income statement and balance sheet. Good work, drugstore.com.
Competitors:
drugstore.com's rivals mainly live in the offline world. Think CVS
Fool contributor Rich Smith does not own shares of any company named above.